Revisit how CME markets responded to the 2016 US elections

Managing event risk around the 2020 US election
To help you navigate uncertainty, we take a look at how markets moved in 2016.*
Elections and referendums with distinctly divergent market scenarios depending on the outcome of the vote can create significant event risk. That type of event risk is characterized by a binary choice: “A” or “B”, with both outcomes have meaningful probabilities such as 50-50 or 60-40. We saw this back in June of 2016 with the Brexit referendum: “Do we stay or do we go?” We also saw event risk in the US Presidential election in November 2016.

Election event risk has the potential to move markets once the outcome becomes known because pre-event, markets typically price the probability-weighted average of the two conflicting scenarios; that is, essentially the mid-point of the post-event scenarios. This means that once the outcome is known, the market will move quickly to the winning scenario.

The charts below depict how the 2016 election impacted multiple products and asset classes, all offered for trading by CME Group.

*Please note, past performance is not indicative of future results.

Source: CME Group
  • In 2016, price volatility spiked eight weeks prior to the election, followed by a downtrend.
  • In 2016, this downtrend stopped (and reversed course) on election day and in the days after.
  • Price volatility peaked on election night, and it took approximately 10 business days to revert back to the same levels as 10 days prior to the election.
  • The expanding trading range pattern prior to the election appears to be following a similar trajectory in 2020.
  • Despite the similarity in trend, the trading range in 2020 is wider compared to 2016.

Source: CME Group

  • In Gold, we saw a similar tightening of trading ranges, similar to E-mini S&P 500 and the 10-Year Treasury prior to the election.
  • In 2016, this downtrend stopped and reversed about 10 days prior to the election and spiked on election night.
  • Trading ranges of Gold are wider now compared to 2016.

Source: CME Group

  • Current Euro FX trading ranges are similar to those observed in 2016.
  • Trading range is trending down into the 2020 election whereas it held steady leading up to the 2016 election.
Cash markets

Source: CME Group

  • The 2020 trading range shows a similar pattern as 2016 and is starting to expand leading up to the election.
View event risk resources